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IEEFA: Turmoil in global LNG markets is curbing long-term demand growth

February 15, 2023

Key Takeaways:

Russia’s invasion of Ukraine upended global LNG markets last year—spurring Europe to buy record amounts of LNG, and pushing prices to their highest level ever

In Asia, LNG has earned a reputation as an expensive and unreliable fuel source, clouding future demand

The EU is taking aggressive steps to trim gas consumption, which could render new LNG import capacity unneeded

Although LNG markets may remain tight for several years, the global LNG market will see a wave of new projects coming online in 2025-27—potentially leading to a supply-demand mismatch and financial risks for LNG suppliers and traders

Global liquefied natural gas (LNG) supplies are likely to remain tight through 2025, curbing demand growth in key Asian import markets. European LNG demand may remain strong in the short term, but will decline by 2030 as decarbonization and energy security policies take effect.  Meanwhile, a wave of new LNG export capacity coming online later in the decade could create a mismatch between supply and demand, elevating financial risks for LNG suppliers and traders.

The findings come from the new Global LNG Outlook from the Institute for Energy Economics and Financial Analysis (IEEFA), which analyzes LNG supply and demand developments in Europe, Asia, Australia, the U.S., and Qatar. The report finds that last year’s LNG market turmoil—characterized by record high prices and unreliable supplies—has undermined long-term LNG demand growth in both Europe and Asia:

  • In 2022, European countries boosted LNG imports by 60% to make up for declining pipeline gas shipments from Russia. Europe’s red-hot LNG demand drove global spot prices to all-time highs, forcing price-sensitive Asian buyers to slash LNG purchases and curtail plans for new LNG imports.
  • China cut 2022 LNG purchases by 20%, due to a combination of high prices, COVID-19 shutdowns, and slower economic growth. High LNG prices have pushed the country’s gas buyers to rely more heavily on domestic production and pipeline imports.
  • India, Bangladesh, and Pakistan slashed LNG demand by a combined 16% last year. Concerns over fuel security, unaffordability, rapidly depleting foreign currency reserves, and demand destruction could limit the region’s medium-term LNG imports.
  • Southeast Asian buyers face challenges from high prices and infrastructure constraints. Long-term LNG contracts with deliveries starting before 2026 are reportedly sold out globally, forcing Southeast Asian countries into expensive spot markets. 
  • In Japan and South Korea, high LNG prices accelerated a resurgence of nuclear power generation that could slash power sector gas demand. In Taiwan, persistent terminal delays and state-owned utility financial difficulties could constrain rapid increases in LNG imports.
  • Europe’s LNG demand could remain strong in 2023 but is poised to fall, as EU climate and energy security policies curtail gas demand by at least 40% through 2030. Although new LNG terminals could boost the continent’s import capacity by one-third by the end of 2024, Europe’s ambitious energy transition targets mean that much of the new capacity could remain unused.

The Russia-Ukraine crisis has exposed long-term financial risks throughout the LNG value chain. In 2022, high spot prices and supply disruptions earned LNG a reputation as an expensive and unreliable fuel source, undermining the prospects for demand growth in key markets. When large volumes of new supply enter the market starting in mid-2025, it could trigger a supply glut, heightening the financial and pricing risks for LNG exporters and traders.

Read the Report: Global LNG Outlook 2023-27 

Report contact: 

Name

Region

Email

Shafiqul Alam

Bangladesh

[email protected]

Arjun Flora

Europe

[email protected]

Haneea Isaad

Pakistan

[email protected]

Purva Jain

India

[email protected]

Ana Maria Jaller-Makarewicz

Europe

[email protected] 

Kevin Morrison

Australia

[email protected]

Ghee Peh

China

[email protected]

Sam Reynolds

Southeast Asia

[email protected]

Bruce Robertson

Australia

[email protected]

Clark Williams-Derry

United States

[email protected] 

 

Media contact: 

Name

Region

Email

Susan Torres

US

[email protected]

Sofia Russi

Europe

[email protected]

Amy Leiper

Australia

[email protected]

Prionka Jha

Bangladesh, India

[email protected]

Alex Yu

Asia

[email protected] 

 

About IEEFA

The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (www.ieefa.org)

 

Shafiqul Alam

Shafiqul Alam is IEEFA’s Lead Analyst, Energy, for Bangladesh . He has more than a decade of experience in the energy and climate change sectors. His interests primarily center on renewable energy, energy efficiency, climate finance, and policy instruments to spearhead the clean energy transition.

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Arjun Flora

Arjun Flora is Director, Europe, at IEEFA. Arjun is responsible for leading and building the Europe team, partnering with funders, campaigners and investors to maximize IEEFA’s impact. As a research analyst, he covers several topic areas relating to the energy transition in Europe, including power utilities, gas infrastructure, sustainable finance, renewable energy, energy markets and consumption trends.

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Haneea Isaad

Haneea Isaad is an Energy Finance Specialist at IEEFA. Based in Pakistan, she covers Asian energy markets with a focus on Southeast Asia and Pakistan.

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Purva Jain

Purva Jain is an Energy Specialist, Gas & International Advocacy at IEEFA. She has more than eight years’ experience in the energy and development sectors. Her areas of policy interest include renewable energy, climate change, energy subsidies, electric vehicles and sustainable development.

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Ana Maria Jaller-Makarewicz

Ana Maria Jaller-Makarewicz is the Lead Energy Analyst for IEEFA’s Europe team. Her research focuses on topics related to gas and LNG, as well as other relevant European energy issues.

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Kevin Morrison

Kevin Morrison is an Energy Finance Analyst, Australian Gas. Kevin works closely with the global oil and gas team to examine issues facing the Australian LNG and gas sector.

Prior to joining IEEFA, Kevin worked for more than 30 years as a financial journalist for Reuters, Sydney Morning Herald, the Financial Times (FT) and Argus Media. Half of this working period was covering the energy and resources sector both in Australia and the UK.

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Ghee Peh

Ghee Peh is an Energy Finance Analyst with a focus on the Asian coal industry and South East Asia. Ghee has worked on major mining IPOs in Hong Kong and Indonesia including coal, copper and gold companies and has a deep interest in commodity markets. 

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Sam Reynolds

Sam Reynolds, a Research Lead with the Institute for Energy Economics and Financial Analysis (IEEFA), focuses on the economic, financial, and climate risks associated with natural gas and liquefied natural gas (LNG) infrastructure developments in emerging Asia. 

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Bruce Robertson

Bruce Robertson has been an investment analyst, fund manager and professional investor for over 36 years. He has worked with Perpetual Trustees, UBS, Nippon Life Insurance and BT. He has appeared as an expert witness before a number of government enquiries into energy issues.

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Clark Williams-Derry

Clark Williams-Derry focuses on the finances North America’s oil, gas, and coal industries. His areas of expertise include: the long-term financial performance of North American oil & gas companies, particularly fracking-focused enterprises; company- and basin-specific studies of oil and gas production; U.S. LNG exports in the context of global markets; and U.S. and Canadian coal export projects.

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